Tangible items have a material or physical form, i.e., anything that we can touch.

When we expect these assets to have a lifespan of more than 12 months, we apply depreciation to them. We use a depreciation process rather than allocating the whole expense to one year. An expense is a specific cost during an accounting period.

The English word ‘tangible’ originates from the Latin word ‘tangere’, which means ‘to touch.’

Tangible assets are depreciated

In a company’s balance sheet, we usually list tangible assets under PP&E. PP&E stands for property, plant, and equipment.

Movable items that have no permanent connection to a building are also tangible assets. We call these assets FF&E. FF&E stands for furniture, fixtures, and equipment. For example, tables, chairs, computers, water coolers, and photocopiers are FF&E items.

In accountancy, these type of assets depreciate or (less frequently) deplete. On the other hand, we amortize intangible assets.

Tangible assets such as books, toys, wine, gold, stamps, and furniture have become asset class in their own right. Many rich people will aim to include these assets as part of their asset portfolio.

This has fuelled the rapid growth in the number of tangible asset managers over the past couple of decades.

“Assets that have a physical existence, or give the holders definite set of financial rights are classified as tangible assets, as opposed to intangible assets such as patents and goodwill. Examples of tangible assets include land, machinery, bank deposits, and investments.”